Fruit and Retail Orange Juice Prices in the
1980s
 Price volatility created by freezes
 Changes in fruit prices quickly translated into
changes in retail prices
 In competition with each other, private label and
brands were quick to change selling prices in
response to changes in fruit prices
 Correlation between retail and fruit prices: 83%
$ Per Gal.
A Comparison of Processed Orange Prices and
Retail OJ Prices in the 1980s
Fruit and Retail Orange Juice Prices in
the 1990s
 Oversupply of oranges and resulting low
fruit prices
 No significant freezes
 Relatively stable fruit and retail prices
Fruit and Retail Orange Juice Prices in the 1990s
 Only change was gradually increasing retail prices
 Because NFC increased market share from 19% in
1991/92 to 39% in 2000/01
 NFC 10-yr. average price was $1.15/gal. higher
than all OJ
 Correlation between fruit and OJ prices: 10%
 Because there was little change in prices
$ Per Gal.
A Comparison of Processed Orange Prices and
Retail OJ Prices in the 1990s
Fruit and Retail Prices Over the Last 10
Years
 The relationship between fruit and retail prices
appears to have changed
 That first became apparent between the 2003/04 –
2006/07 seasons
 Florida orange crop reduced by 47%
 Tree losses to canker eradication program and
a-typical high-priced real estate market
 Yield loses due to effects of hurricanes
Fruit and Retail Prices Over the Last 10
Years
 Fruit prices more than doubled in response
to reduced supplies
 Increased OJ cost of goods
Florida Orange Production and Prices
Season
2001/02
2002/03
2003/04
2004/04
2005/06
2006/07
2007/08
2008/09
2009/19
2010/11
Production
Million Boxes
230
203
242
150
148
129
170
163
133
139
Delivered-In Price
$/LB. Solids
0.84
0.94
0.71
0.91
1.33
2.11
1.39
1.07
1.45
1.67
Sources: Florida Agricultural Statistics Service; Florida Citrus Processors Association
Retail OJ Market Behavior During Past 10
Years
 Retail prices increased to cover higher fruit
prices and reduce market in line with reduced
supplies
 Retail price increased a total of 32% between
the 2003/04 and 2006/07 seasons
 Retail market volume declined a total of 19%
between the 2003-04 and 2006-07 seasons
U.S. Retail Orange Juice Market and Prices
Season
2009/10
2008/09
2007/08
2006/07
2005/06
2004/05
2003/04
2002/03
2001/02
2000/01
Volume
Change
Million SSE Gal.
%
608.1
628.6
623.2
648.2
743.3
792.9
802.4
836.4
861.2
887.7
Source: AC Nielsen
-3.3
-0.8
-3.9
-12.8
-6.3
-1.2
-4.2
-2.9
-3.1
-
Price
$/Gal.
Change
%
5.51
5.61
5.91
5.71
4.69
4.41
4.34
4.40
4.39
4.37
-1.7
-5.1
+3.5
+21.7
+6.3
+1.6
-1.4
+0.3
+.05
-
Fruit and Retail Prices Over the Last 10
Years
 In 2007/08, Florida orange production recovered
Not to pre-canker/real estate levels
But 32% above 2006/07 level
 Florida fruit prices also declined
 Not to pre-canker/real estate market levels–but
34% below 2006/07 level
Retail OJ Market Behavior During Past 10
Years
 But even though orange production had
increased by 32%, retail OJ prices continued to
increase
 Market volumes continued to decline
As
Prices
Increased,
AsOrange
Orange Juice
Juice Prices
Increased,
Consumption
Decreased
Consumption Decreased
$4.40
$4.41
$ Per Gal
Mil. SSE Gal
$4.34
$4.69
$5.71
$5.91
U.S. Orange Juice Inventories and Florida
Processed Orange Prices
Season
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
Ending Inventory
Million SSE Gal.
791
675
492
363
619
673
548
391
Orange Price
$/Lb. Solids
0.71
0.91
1.33
2.11
1.39
1.07
1.45
1.67
Sources: AC Nielsen, Florida Citrus Processors Association
Prices Offered by Processors for Valencia Oranges
on the Cash Market in 2008
Month
January
February
March
April
May
June
$ Per Lb. Solids
1.65
1.55
1.40
1.30
1.25
1.05
Source: Florida Citrus Mutual
During The 2006/07 Season, OJ Brands Were
Sourcing Fruit on 3-Yr. Floored Contracts
 Brands needed to insure future fruit supply to
protect distribution and valuable shelf space
 Floor prices were much higher than the $1.07 that
processed orange prices dropped to in 2007/08 on
the cash market
 The cash market represents only 20-30% of the
oranges bought for processing
 Small residual market that a large buyer can
impact dramatically
During The 2006/07 Season, OJ Brands Were
Sourcing Fruit on 3-Yr. Floored Contracts
 Brazilian bulk concentrate prices from December of
2007 to November 2008 averaged $1.52/lb. solids
 Less expensive than juice made from fruit on highpriced floors
 Result was slower use of inventories from highpriced Florida fruit
Market Share Among Major U.S. Food
Retailers in 1998
Company
Share
Kroger
9.6
Alberston’s
8.0
Wal-Mart
7.1
Safeway
5.6
Ahold USA
4.4
Supervalu
4.0
Fleming
3.4
Winn-Dixie
3.1
Publix
2.7
A&P
2.3
Source: Supermarket News
Top 5: 34.7 %
Top 10: 50.4 %
Market Share Among Major U.S.
Food Retailers in 2008
Company
Share
Wal-Mart
29.0
Kroger
8.6
Costco
8.1
SuperValu
5.0
Safeway
5.0
Loblaw Cos.
3.5
Publix
2.7
Ahold USA
2.4
Delhaize America
2.1
C&S Wholesale
2.1
Source: Supermarket News
Top 5: 55.7 %
Top 10: 68.5 %
$ Per Gal.
A Comparison of Processed Orange Prices
and Retail OJ Prices Over the Past 10 Years
What Happens If Fruit Prices are Lagged by
One Year?
 The correlation goes to 86%, just a little higher
than the 83% in the 1980s when retail and fruit
prices both changed in the same year
$ Per Gal.
A Comparison of Processed Orange Prices and Retail
OJ Prices Over The Past 10 Years
Does Lagging Fruit Prices by One Year
Improve the Correlation in the 1980s?
 No. The correlation drops to 30%
$ Per Gal.
A Comparison of Processed Orange Prices and
Retail OJ Prices in the 1980s
Summary
 In the price-volatile 1980s, retail OJ prices adjusted
up or down with changes in fruit prices – within the
same year
Private label and brands competing for market
share
 Fruit and retail prices were stable in the 1990s
Few changes to measure correlation
 Retail prices increased as NFC increased its market
share
Summary
 During the past 10 years the relationship between
fruit prices and retail OJ prices might have changed
 Retail prices still increase in response to increased
fruit prices - during the same year
 But it took a year after fruit prices declined in
2007/08 for retail OJ prices to decline
 At the same time, the brands had high priced
inventories due to sourcing fruit on high floor-priced
three year contracts
Conclusions
 This changed relationship may or may not be permanent
 It could be due to increased consolidation among
retailers
If so, its likely permanent
 In 1998, the biggest 5 food retailers were 35% of the
market
 By 2008, they were 56% of the market
 Or it could be due to fruit sourcing strategy during this
period by the OJ brands
 If so, that depends on future fruit sourcing strategy of
the brands